Troy Senik: Americans afraid to open bill for Big Government

Come January, when the credit card bills from the Christmas season start arriving, many Americans will implement a sophisticated coping mechanism: Pretending they're not there.

It's the nature of a debt-heavy economy to be fueled by denial. Bills so hastily run up that many will sit, unopened, until beyond their due date. In a fiscally immature society, acknowledging excess becomes even more daunting a prospect than rectifying it.

Extrapolate this trend to the country as a whole and you begin to understand the bacchanalian affair that is the federal budget. The nation's debt currently stands at more than $16.3 trillion, larger than the size of the entire U.S. economy in 2011. To put that in perspective, imagine a family earning the median national income ($52,762, according to the Census Bureau) and carrying roughly $55,000 in credit card debt. Pair that with an indication that the family in question has no intent to stop the spending spree, and you'd be where the nation is today.

The failure to acknowledge this reality is representative of a deeper pathology: America is a country that continuously lies to itself about spending.

Consider the debate over taxes that has raged during negotiations over the fiscal cliff. Under the banner of debt reduction, President Obama and Democrats in Washington have insisted that rates rise on the wealthiest Americans. But even the White House's own projections estimate the revenue from those increases at an average of $160 billion per year – less than 1 percent of the current national debt. That's the equivalent of our median American family trying to get out from under that $55,000 debt load by paying down the credit cards at a rate of $45 per month.

Lost in the argument over taxes is an essential point: The real rate of taxation is not the percentage of your income taken by federal, state, and local authorities; it is the rate at which they spend. Whether you pay today or tomorrow, every government outlay is a claim on your pocketbook. To put this reality into sharp relief, if every U.S. taxpayer was actually billed for their current share of the debt, the total would exceed $110,000 a head.

The problem, of course, is that this reality is never put into sharp relief. In fact, our system of taxation is designed to conceal the true cost to the taxpayer at every turn. The system of tax withholding, for example – designed as matter of convenience – removes the sting of having to regularly sit down and write a check to the government. As a result, the psychology of taxation is fundamentally altered. Rather than taxes being the percentage of your wages you must hand over to government, take-home pay becomes the percentage of your wages government must hand over to you.

A similar sleight of hand is at work in the provision of the tax code that allows for the deduction of state and local taxes. While this keeps more money in the pockets of those who live in high-tax states like California or New York, it also insulates voters from the true costs of the big-government initiatives they support at the ballot box.

The willful delusion even extends to Social Security, where the supposedly sacrosanct "trust fund" is filled with nothing more than IOUs.

The most recent election may well indicate that the electorate has settled on costly, expansive government as preferable to a limited state that offers fewer services and lower taxes. That is foolish, but it is their right in a democracy. They ought not to expect the benefits, however, without shouldering the costs. Big government comes at a steep price. Sooner or later, those bills must be opened.

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